The present invention relates to a project finance analysis and negotiating tool (also referred to by the acronym “PFANT”) and, more particularly, to machine-implementable software that permits banks, engineering companies, project sponsors, credit insurance advisers and others having interest in a project to undertake a comprehensive financial analysis for negotiating major building projects such as industrial plants and roads.
Interested parties to a project finance deal attempt to undertake a thorough financial analysis before financial closure. The analysis is part of the due diligence of any potential lender. The parties create a financial model based on a feasibility study (market survey, engineering etc.). Usually they agree on a limited recourse package to support the project-company in case of cash flow problems.
The science of project financing is becoming more developed and studied. Various sources exist for learning about the many aspects of project financing, one example being a text authored by John D. Finnerty entitled Project Financing/Asset-Based Financial Engineering published in 1996.
The parties create the financial model specifically for the project they prepare. This is usually done with a spreadsheet(s). Creating a financial model is a highly specialized and costly task. Financial models are subject to change as project-preparations progress. During negotiations proposals are aired whose consequences quite often cannot be properly assessed without revising the financial model first. This adds cost and delays project preparations.
Financial modeling spreadsheet software is now usually generated on a project-specific basis. In addition to taking into account the specific details of a particular project, the software modeler has to work with the requirements of a particular spreadsheet software package. In an effort to overcome some of these time-consuming problems, certain “golden rules” have been developed for project finance modeling in order to give a modeler a methodology regarding layout, structure and technique interaction to improve skill levels. Such an approach is taken in a prior art publication entitled Financial Modeling For Project Finance, a Euromoney/DC Gardner workbook.
Notwithstanding the usefulness of such guidelines and relatively sophisticated spreadsheet software, they do not eliminate the laborious tasks associated with project finance modeling. More importantly, they do not provide interested parties with sufficient flexibility during negotiations to determine if a project is feasible and under what circumstances.
To this date there exists no project finance software package that creates a project preparation, negotiating and testing environment with the standard project finance tools (debt service reserve accounts {[DSRA], sweep, stand-by loans, deferral credits for inputs and off-take fees, input price as a function of sales price).